Oil prices rose above $30 a barrel Tuesday as traders speculated that large producers might be more willing to cut production, which could alleviate the global glut of crude.
Light, sweet crude for March delivery settled up $1.11, or 3.7%, at $31.45 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained $1.30, or 4.3%, to $31.80 a barrel on ICE Futures Europe. Both are up in the last three of four sessions, with Nymex oil rising more than 18% over that span.
Iraq's oil minister said Tuesday at an energy conference there he sees signs that Saudi Arabia and Russia are more "flexible" now on supply cuts. A vice president at OAO Lukoil, Russia's No. 2 oil company, also told state media earlier this week that Lukoil's production will likely decline this year and that Russia's whole oil industry should cut back.
Russia and the Organization of the Petroleum Exporting Countries, including its largest producer Saudi Arabia, have opted not to cut production during the oil-price plunge that started in 2014 in a bid to maintain market share. Some large producers, including Saudi Arabia and Iraq, increased output last year instead. OPEC officials have said they are unwilling to cut production unless non-OPEC producers such as Russia and Mexico also agree to cut.
Other OPEC members at the Kuwait conference Tuesday reiterated that position, defending the strategy to keep pumping crude and saying OPEC wouldn't cut without participation from non-OPEC countries. On Monday, the chairman of Saudi Arabian Oil Co., or Saudi Aramco, the world's largest oil producer, said his country could weather low prices for "a long, long time," dimming the prospects for a production cut.
The rally faded sharply in the last hour before settlement. Many traders don't believe any major cuts are coming from the world's big exporters and are also concerned that U.S. supplies are still rising, said Gene McGillian, an analyst at Tradition Energy. The U.S. Energy Information Administration is likely to report tomorrow that U.S. inventories added 3.3 million barrels of oil last week, according to analysts surveyed Tuesday by The Wall Street Journal.
"It's another signpost the excess supply fears have the market by the throat," Mr. McGillian said. "The people buying on (suggestions of OPEC or Russian cutbacks) are reading deep between the lines for what they want."
The supply-demand mismatch has kept oil prices in the doldrums for nearly two years and there are few signs the market will balance itself soon. Oil prices have dropped about 18% since the start of the year and analysts say prices will likely stay volatile.
Iran, another large OPEC producer, is expected to increase its exports in the coming months now that international sanctions have been lifted, further flooding the global market with crude.
In the U.S., where a massive boom in shale-oil production in recent years has helped push the global market into oversupply, output has stayed higher than expected as producers have cut costs and become more efficient, even while slashing spending on new drilling.
But some investors and analysts expect U.S. production to decline at a more accelerated rate this year as companies are forced to cut spending further.
U.S.-based energy producer Hess Corp. said Tuesday that it expects to spend $2.4 billion on exploration and production this year, down 40% from last year and down 20% from the 2016 guidance the company gave in October.
"We plan to reduce activity at all of our producing assets," said president and chief operating officer Greg Hill in a statement.
Despite the additional spending cuts, the company still expects to produce the same amount of oil this year as it predicted in its October guidance.
Credit Suisse Group AG on Tuesday cut its U.S. oil-price forecast for 2016 to $38 a barrel, down from its prior expectation of $56 a barrel.
"The panic that is engulfing markets globally is wreaking havoc on oil markets as well," the bank said. "Oil markets have become acutely concerned that a global recession, triggered by a 'hard landing' in China will remove oil demand growth, which has been the one solid, fundamental prop so far in this cycle."
Gasoline futures gained 1.7% to $1.0472 a gallon. Diesel futures rose 3.5% to 96.77 cents a gallon.
Georgi Kantchev and Summer Said contributed to this article.
By Nicole Friedman and Timothy Puko